GEAPS Exchange '98

Advances in technology will have sweeping effects on grain handling and marketing in coming years, according to various speakers at the 69th Annual International Technical Conference and Exposition of the Grain Elevator and Processing Society, held Feb. 21-24 in San Antonio, Texas, U.S. From improved satellite imagery analysis to genetic developments, the inevitable march of technology will force changes in the way grain is produced, stored and marketed, the speakers indicated.

This year's GEAPS conference attracted more than 1,800 participants and 220 exhibitors at the annual trade show. Conference organizers decided to forego the annual business luncheon, including an address by a keynote speaker. Instead, buffet lunches were served on the trade show floor to promote interaction among exhibitors and participants.

The educational sessions featured subjects as varied as diversity in the workplace, understanding financial statements, maintenance of horizontal conveyors and conducting business in Latin America. In other sessions, the underlying theme was technology-driven change.

Space-Age Technology.

A series of technologies related to the “space age” is providing information that can help both producers and grain handlers improve profits, according to two speakers. Mike Lupardus, senior sales manager for Ag-Chem Equipment, Guthrie Center, Iowa, U.S., said that the use of satellite imagery enabled producers to match plant growth characteristics and inputs to conditions at precise sites within fields, which could result in higher yields at less cost .

But Mr. Lupardus noted that producers could fall into the “pretty map trap” without proper analysis of the information provided by satellites. It is in this area of information management that grain elevators can provide services to producers and increase margins, he said.

“In some cases, substantial investments are made to gear up for this technology,” he said. “The provider of these services can spread the cost over the required acres for justification.”

Daniel Lustyan, Agricultural Information Exchange/Space Imaging EOSAT, Thornton, Colorado, U.S., went into greater detail on the current status of satellite technology's applications to agriculture and discussed future applications. At the heart of the current technology is the Global Positioning System, a “constellation” of about 24 satellites in Earth orbit that is used to pinpoint precise locations on earth and enables mapping of fields.

With the use of Geographic Information Systems software, measurements of yield, moisture levels, soil characteristics, insect locations and other factors can be added to the G.P.S.-generated location data to determine relationships between yield/quality and conditions at exact field sites. Producers then can adjust production practices to “take advantage of the positive effects and reduce the negative ones” and obtain more consistency in crop yield and quality.

Remote sensing via satellites such as Landsat has been available for more than 25 years, but the smallest area that could be “seen” was about 23 meters in diameter. This low resolution of the images provided made day-to-day crop management and predictive analysis unfeasible, Mr. Lustyan said.

But recent regulations now allow licensing in the United States of high-resolution commercial satellites, he said, and these satellites will enable the gathering of much more information. For example, the Indian Remote Sensing Satellite provides imagery at about 5 meters, while the eventual launch of the IKONOS-1 and -2 satellites will offer imagery at less than a meter with revisit times of twice a day. The new technology will offer applications that go beyond crop management for U.S. producers, Mr. Lustyan said.

“These advanced technologies allow the observation of crops anywhere on Earth,” he noted. “This allows for the quantification of crops from around the world. How many (hectares) of wheat are there? What is the state of growth, and what is the likely condition at harvest?”

Computer models now are being written to allow agribusiness to estimate yield, and therefore the quantity of grain coming to market, he said. Additional models will focus on weather, merchandising and pricing data inputs as well as other historical data sets for local, regional and global analysis. These new technologies are possible because of the advanced computer processing systems that already exist and that are constantly being improved.

“Regional planning based on objective information or predictive planning based on relational database models will create the next major growth in agricultural production and the economy,” Mr. Lustyan said.

Value Through Biotechnology

The buzzword of the 1990s, biotechnology holds great opportunities and challenges for the grain industry, according to Court Saunders, industrial products director for Pioneer Hi-Bred International, Inc., Johnson, Iowa, U.S.

Although slow to develop, agricultural biotechnology is rapidly gaining momentum, as genetic transfer becomes applicable to an increasing number of crops and as analytical tools are invented to measure value-added traits more quickly, Mr. Saunders said at a GEAPS education session. Other reasons behind the “biotech” push include environmental, health and food safety concerns, he said.

Biotechnology has added value in two areas, Mr. Saunders said. One is through so-called “input traits” such as herbicide or insect resistance, values which accrue to the producer. The second area is “output traits,” including elevated levels of amino acids, extractable starch and oil; and reduced mycotoxin contamination. These output values accrue to the end user as well as to the producer.

Grain handlers and other intermediaries in the marketing chain will face new challenges in the expanding biotech environment, Mr. Saunders said. These include the means to measure and segregate the new end-use traits to satisfy the ultimate consumer, such as livestock feeders, millers and food manufacturers.

“A critical issue facing all members of the production chain are point-of-sale value determinations in addition to traditional grading,” he said. “New techniques, including assays for small molecules such as amino acids, will become increasingly important.”

Mr. Saunders listed other challenges for the grain industry, consisting of segregating supplies based on end use, marketing supplies based on end use, establishing closer relationships with end users and developing opportunities to share in the added value. In fact, assuring that the added value is shared equitably throughout the production and marketing chain is one of several issues that must be addressed, he said.

Typical end users are willing to pay only an additional U.S.$10 a tonne for every U.S.$40 of value created, Mr. Saunders said. Meanwhile, other links in the chain also must be able to capture value.

For example, seed companies must recover research and development costs, which can amount to tens of millions of dollars for each product, and they hope to cover costs through increased market share or seed premiums. Producers need to be compensated for potentially higher seed costs and possibly lower yields, as well as for more careful harvesting and handling, and grain handlers need to recover increased costs for measurement and identity preservation.

Up to now, most of the value added through biotechnology has been a relatively small percentage of the grain's total price, in the order of U.S.$10 a tonne, he said, adding at that level “there's not a lot of value to share.” As multiple desirable traits are “stacked” into a single grain or oilseed product, the percentage of added value will increase, offering a large enough “value pie” for each link  seed company, producer, handler and end user  to capture its share.

A major roadblock for further biotechnology advances in grain  and the development of an end-use driven market  remains the current need for identity preservation of grain with specific end-use traits, he said. But he noted that technologies to validate desirable traits at the point of sale and/or the point of use were likely to be developed, which could ease the burden of identity preservation on grain handlers and storage facilities.

To date, most biotechnology efforts have centered on maize and soybeans, Mr. Saunders said, primarily because those commodities are more easily genetically modified to add value. Some biotechnology work has been done on wheat, primarily in the area of modified starches and primarily in Europe, but development of commercially viable wheat varieties with added value from biotechnology is about two to three years behind maize and soybeans, he said.

Identity Preservation

An identity preservation program already is in place in one part of the U.S. Southwest, where the 21st Century Grain Processing Cooperative has established “I.P.” handling of wheat as part of its integrated operations that include a 54-tonne flour mill in Rincon, New Mexico. The flour mill is expected to begin operations in the next few months using identity preserved wheat from the 1997 harvest, according to Lynn Rundle, general manager of the cooperative, who discussed the program with GEAPS members. The mill's primary market will be tortilla makers.

The I.P. system involves partnerships between the Kansas-based cooperative and each of 15 individual grain handling facilities in southwestern Kansas, Mr. Rundle said. Each facility agreed to dedicate specific storage bins for the wheat and to keep it segregated for delivery to the mill.

Participating farmers were required to plant one of eight varieties considered to be among the highest in milling quality, Mr. Rundle said. Tests indicated the quality of the wheat delivered under the program exceeded “station averages,” and producers who sold surplus wheat were able to attract protein premiums, he said.

Mr. Rundle said I.P. benefits for grain handlers included a guaranteed volume of wheat delivered and less ownership risk. In addition, such agreements can help grain handlers establish a new customer base, as well as provide partnership opportunities with high-volume, more sophisticated producers, he said.

Mr. Rundle noted that the cooperative's 360 producer members, who are obliged to deliver a fixed amount of wheat each year, viewed their involvement as a long-term investment. Financial returns will not stem from per-tonne premiums  historically the incentive offered to growers of identity preserved grains  but from the “pull through demand” of specific quality conscious end users of the cooperative's flour, he said.

“We're looking for partners, not premiums,” he said, adding that the cooperative was seeking additional “strategic alliances” to help its members capture value from their crop.

Mr. Rundle said studies were under way at Kansas State University, Manhattan, Kansas, U.S., to analyze the feasibility of implementing I.P. programs in the broader marketplace. Initial work indicates that grain facilities with two or more legs should be able to handle identity preserved grain with no sacrifice in capacity, he said. Other studies also are planned to examine potential methods of rapid end-use quality assessment.

Mr. Rundle told GEAPS members that the cooperative's farmers were dedicated to the concept of being partners in the food business, especially because biotechnology and consumer demand for specific qualities increasingly would give end users much more power over crop decisions. Grain handlers and producers can both benefit from this evolving marketplace if they work together, he said.

Members of the Grain Elevator and Processing Society and the U.S. National Grain and Feed Association have approved a plan to form a strategic alliance.

Under the alliance, GEAPS will assign staff representatives from its Grades and Weights and Safety, Health and Environment committees to serve on the N.G.F.A.'s Grain Grades and Weights committee, Food and Feed Safety committee and Safety, Health and Environmental Quality committee. GEAPS will disband its Grades and Weights committee, replacing it with an advisory council that will provide operations input and expertise to the N.G.F.A. Grain Grades and Weights committee. The GEAPS Safety, Health and Environment committee will continue to exist, but will focus on education, grain operations issues and communication opportunities, instead of government rule making and industry policy considerations.

Some of the goals are to eliminate duplication of effort and reduce time and expenses incurred by volunteers.

GEAPS announces 1998-99 officers

The Grain Elevator and Processing Society announced the elections of officers and directors for 1998-99 at the GEAPS annual meeting Feb. 24 in San Antonio, Texas, U.S.

Officers elected at the meeting were Doug Jensen, Cargill, Inc., who was named international president; and Tim Paurus, Harvest States Cooperatives, who will serve as first vice-president. Terry Mohl, Agri Northwest, will serve as international board chair.

Tom DiGiorgio, Scoular Grain Co., has been named international second vice-president. The election puts him in line to serve as first vice-president for 1999-2000 and as international president for 2000-01.

Elected to three year terms as directors were Michael Geurts, Peavey Co.; Ben Lackey (incumbent), Riceland Foods; John Lemaster (incumbent), United Grain Corp.; and Donnie Love, Cargill, Inc. Bill Mullens, Port of Houston (Texas) Authority, was elected to fill out two years of an unexpired term.

In other action at the meeting, GEAPS associate members, who represent some 1,100 suppliers to the industry, elected Steve Kimes, T.E. Ibberson Co., as 1998-99 president. Other officers elected were Al Meier, Meier Sales & Engineering, vice-president; and Fred Norwood, Cereal Ingredients Laboratory Services, secretary.